Given that national income is ₹ 80 crore and consumption expenditure ₹ 64 crore, find out average propensity to save. When income rises to ₹ 100 crore and consumption expenditure to ₹ 78 crore, what will be the average propensity to consume and the marginal propensity to consume ?

Explanation

Average Propensity to Save = `("Saving (S)")/("Income (Y)")= (80-64)/(80)=(16)/(80)` = 0.20
When income rises to ₹ 100 crore and consumption expenditure to ₹ 78 crore
Average Propensity to Consume = `("Consumption (C)")/("Income (Y)")= (78)/(100)` = 0.78
Marignal Propensity to Consume = `("Change in Consumption"(DeltaC))/("Change in Income" (DeltaY))=(78-64)/(100-80)=(14)/(20)` = 0.70